Q. What’s one tip you’d give an entrepreneur who is considering manufacturing their product overseas? Any major considerations not to overlook?
The following answers are provided by the Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.
1. Avoid the Pitfalls of Manufacturing Overseas
The biggest tip I would give to someone getting started with manufacturing overseas is to have something written in the agreement that addresses imperfections, damages or mistakes in the product. We import 200 to 300 containers a year, and one bad container could cost up to $80,000. Without clauses in the agreement (and a quality control person there), a bad shipment could cripple a startup.
- Gary Nealon, The Rox Group
2. Hire Someone Who Has Lived There
Every once in a while people contact me about sourcing their product in China. I am able to give a lot of feedback on how things work and some of the things to consider in the short, medium and long term. I would recommend hiring someone who has been in that country for years to give you a good sense of what you are getting into. That may save you a ton of time, stress and money.
- Derek Capo, Next Step China
3. Start Small and Scale Slowly
Make a slow transition into manufacturing overseas. Do not expect to push 10,000 quality orders out overnight from a new supplier because you’ll quickly learn the error of your ways. Start slow so you can get your feet wet, and once you do, you’ll begin to learn the ropes and eventually be able to successfully source products from overseas.
- Danny Wong, Blank Label
4. Pay Attention to Every Detail
Inline image 3
Not all countries have the same quality standards that the U.S. has or even the same business practices. If you don’t address an item in the agreement, you can assume it won’t be done to your standards. It’s rare that an overseas manufacturer will exceed your expectations. It’s usually the other way around. This means you have to think through every small detail in the contract upfront.
- Dave Nevogt, Hubstaff.com
5. Be Wary of Lost Sales
6. Realize It Could Hinder Collaboration
We have been manufacturing overseas for two years. Recently, we’ve tried to update various components of our product and have struggled to iterate. This is partially due to a language barrier. But more detrimental is our inability to put our designer and our manufacturer in the same room. Overseas manufacturing may cost less, but it hinders your ability to collaborate.
- Aaron Schwartz, Modify Watches
7. Work With On-Shore Connections
Inline image 2
You need to be working through someone you know and trust and who is on shore. I’ve seen a lot of people pick any company to work with overseas simply because they thought they would save a little money. With an on-shore connection, you can pick the right firm to work with and manage them properly.
- Andy Karuza, Brandbuddee
8. Consult Regional Financial and Legal Experts
New countries come with entirely new business environments. Make sure to check the cost of production as well as the cost of importing. There may be additional duties for using certain materials. It’s also important to understand any new legality that may affect your operations, like overseas employment laws or tax laws. Ask someone who knows!
- Ben Rubenstein, Yodle
9. Visit the Manufacturing Site
You need to spend some time on the ground meeting people and overseeing where everything will be put together. All the successful product developers I know always go to the manufacturing site to review it in person. You have to see it to believe it, so to speak.
- Russ Oja, Seattle Windows and Construction, LLC
10. Compare Minimums
Many aspects of cost might be cheaper overseas, but manufacturing domestically can still be less expensive overall due to the high minimum orders required by third-party manufacturers. Staying close to home will give you more control over your inventory investments.
- Sam Saxton, Salter Spiral Stair and Mylen Stairs